It doesn't always have to be more money or a nice company car: These tips will also help keep your best employees on board. And discover what's behind the two-pizza rule.

When a good employee leaves it means a dual loss for the company, which not only loses a skilled worker, but also has to invest time in finding and developing a replacement. This is expensive: filling an open position is estimated to cost about 40 percent of the annual salary of the new employee – for advertising, interviews and induction.

The simplest way to reduce these costs? Keep your employees with the company. Especially the good ones that are hard to replace. So the first question that needs answering is: What makes a good employee? Unfortunately there is no simple definition. But there are indicators companies can use to recognize good workers.

Dominic Multerer, who works as a management consultant, compares businesses with a soccer team: “Not every player does well with every coach,” he says. But that doesn't mean the employee is bad. So leaders first have to find out what kind of people fit into their team and how to get the best from them.

Which employee fits into my team?

Management experts have developed a specific kind of evaluation for this, known as the ABC analysis. It assesses employees based on their performance. The Gallup Research Institute categorizes them as Drivers (A), Doers (B) and Detractors (C). A manager can identify which group their employee belongs to using various criteria: A generally works independently and is known for their vision, B follows instructions and C tends to slow the others down.

In German companies
according to Gallup's estimates
only 16 percent of employees fall into category A, while 68 percent are Doers and another 16 percent are Detractors. "The spread of A to C employees is much larger than the average employer believes," says
HR consultant Jörg Knoblauch
in an interview with t3n. When an employee belongs to category A, the company should do everything possible to keep her.

A current
study
from the Cologne Institute for Economic Research shows how hard this can be these days. It indicates that almost one-third of workers started or ended an employment relationship last year – five percent more than in 2011. The reason is simple: The less unemployment there is, the more likely people are to change jobs, as international economics expert Holger Schäfer of the FAZ states.

Retain employees: Here's how

Digital Insights has put together nine tips that can nonetheless help with employee retention.

1. Talk to your employees

To understand the goals a good staff member has, there's only one thing that works: talking. "It sounds obvious," says Dominic Multerer, "but what it comes down to is you have to talk to your employees." This expert recommends monthly feedback sessions with staff instead of an annual review. That way the manager knows what's bothering their employee, and can respond accordingly.

Leaders must also address their employees' development. Only one out of every three workers admits to getting anything truly useful for their work out of dialogue with their boss, according to Gallup's
Engagement Index 2015
. Instead of focusing only on the employee's engagement and wishes, the discussion should therefore also address what would help them improve concretely, and how they can reach new goals. Because if an A worker feels like they can't develop any further, there is a danger that she'll look around for a company that can offer her new challenges.

Be careful, though – while some people look forward to meetings with their supervisors, others find them annoying. "The meeting can't be a requirement," says Multerer. That would be more a cause of dissatisfaction than a positive workplace feature for some employees. "It's important to adapt to individual preferences." Instead of relying on one review a year, a leader should offer regular opportunities for dialogue – and let the employee decide whether or not to take advantage of them.

2. Listen to your employees

If you value an employee, ask for his opinion. Often a team member builds up competency and experience over many years, but no one takes him seriously when he criticizes a process, says Multerer. "I've seen an employee who'd been working in a company for four years make a suggestion about how his employer could improve something," the expert relates. His boss responded with: "Good suggestion, but we've always done it like this." A statement like this gives the impression that the employee's opinion doesn't count – and that can be frustrating.

To avoid this, the manager should listen very carefully to her team member's idea. Because someone who's worked for you for a while will have a good justification if they want to change a process. If the idea won't work even so, you have to offer good reasons for rejecting it. That way you let your team member know that you took his suggestion seriously.

3. Ask about your own weaknesses

As a leader you have to acknowledge your own mistakes. Your employees will know them best – ask them what you could do better. "A supervisor isn't infallible," says HR consultant Knoblauch. So it's important to explore your own faults in discussions, and figure out what you can work on. Particularly when an employee is dissatisfied with their boss or feels they're being unfairly treated, open questions such as "What can I do better?" can help address problems.

However, not every employee likes to express direct criticism. An anonymous questionnaire or online survey can help in getting honest feedback. Ultimately, thought, it's not just a question of gathering feedback, but of what you do with it. If an employee criticizes you, don't justify yourself. Instead, ask what precisely bothers him and then calmly think later about how you can smooth over your flaws. If you can't recognize this fault, ask others what they think of the situation. Then, if you feel that it's not really a weakness or a mistake, talk to your employee again, but show respect for their opinion.

Why is this important for employee retention? One out of every four employees resigned because of their boss in 2015.

4. Create a good working environment

Nothing matters more to employees than the work environment. It is the most important factor that binds employees to their companies, according to a
survey
by the German Labor Ministry. On a scale of one to five, from unimportant to very important, respondents rated the work environment a 4.3 – ahead of salary and personal contact.

"Companies create a family atmosphere by promoting a sense of togetherness," says Jörg Knoblauch. He mentions a software firm whose leader formulated the motto: "Forget work-life balance, it's time for work-life blend." Instead of opposing work and free time, he wants to blend the two areas, by cooking together, playing volleyball, going mountain biking, offering free cappuccinos. "Creativity is needed to show employees that they're worth something to me," he says.

Dominic Multerer calls this "employee service." Just like customer service, it should offer added value for staff. "If you build a cafeteria and a daycare, you make life more comfortable for your employees," says Multerer. That can play a strong part in retention – who wants to worry about finding childcare, if they've been given it automatically until now?

5. Be transparent

Whether it's budget planning, the next big project or general strategy – there are many decisions that leaders make by themselves or with the next management level up. And then only inform staff when everything is a done deal. This can have a negative effect on people's relationship to the company, because it gives employees the impression that things are being decided above their heads, that their opinions don't matter and that they can't change anything. This creates a divide from the employer.

So transparency is an important way to keep good employees. "If you as the boss sit down and explain to your employee what you're planning for next year and why, you create a connection to your company," explains Multerer. Many firms never talk about their goals or changes, so employee are often confronted with new tasks, without knowing where they came from or why. That's why management should communicate extensively: "If a manager wants to change something, she should also get her employees' opinions," says the expert. Because people who shape their own future are generally more satisfied.

6. It doesn't always have to be a new job title

There are some theories of behavioral research that have made into everyday psychology. This includes rewards according to B.F. Skinner, where recognition, a prize or an honor is given for an activity that is done well. For example, giving people who do good work more money or a promotion. In principle companies are doing nothing wrong to follow this advice. But instead of offering all employees the same incentives, as they are known in the field, they should find individual motivators.

Promotion illustrates this point well. Many managers want to reward their best workers by promoting them to a higher position. But you should always ask yourself whether the employee actually wants that. Because not everyone wants more responsibility, or to be a boss. There are other ways to show a team member who is happy with his job that you value him – for example with better pay.

But it's also true that money isn't everything. "There are people who respond well to gifts, and there are people who respond well to praise," says Jörg Knoblauch. A leader has to find out what counts for her worker. For example, an extroverted sales agent probably requires a different type of reward than an introverted accounts controller, Knoblauch advises. That might be anything – further education, more vacation, or an internal recognition such as "worker of the month."

7. One minute praising

Even if praise doesn't sound at first like an especially meaningful reward, employers shouldn't only show their appreciation in material terms. Companies too often follow the motto: "If I don't criticize, that's praise enough."

But praise and thanks are a simple and effective way to express your appreciation to an employee. To do this, Jörg Knoblauch has introduced "one minute praising" in his company: He requires his managers to praise one employee every day. This doesn't mean a big song and dance, but brief call-outs. Did an employee make a great PowerPoint presentation? Gain a new customer? Help another team member? These are all reason enough.

However, praise shouldn't be offered daily, or it loses value. Then it's no longer seen as appreciation, but as empty words. So praising an employee every day, doesn't mean praising the same employee every day.

Uh-oh, that is definitely too many pizzas – at least according to Jeff Bezos. (Photo: Shutterstock)

8. The two pizza rule: Keep your team small enough to know everybody

To really know what your employees want, you have to know them personally. Amazon founder Jeff Bezos introduced the "two pizza rule" in his company for this purpose: A team should only be so big that two family-sized pizzas are enough to feed everyone. That means at the most 20 workers per team.

What does this have to do with staff loyalty? "A manager has to know how her workers are doing," explains Multerer. You can't expect that of a boss with 300 employees, but that's why there are department leaders. Their job is to know their team's mood. For Multerer this is a key leadership quality: "If you don't know how your employees are doing, then you're not a good manager," he says. "A department leader has to know when an employee is dissatisfied."

9. Recruit with the help of your employees

If you do have to hire a new team member, involve your other employees in the selection process, and ask them who they recommend. This has two advantages for the company: First, you can only talk to so many people who might be interesting for the business. "Most hires don't happen through advertising, but by recommendation," says Knoblauch. Because an employee would never recommend someone they don't think highly of.

And second, you create even more connection to your company, if you hire the friend of an employee. "Someone who has friends in the company is less likely to leave," Knoblauch says.

Conclusion

Communication, appreciation, co-determination: these are the three core principles that every manager should follow. A leader should always be listening for his employees' problems and wishes. Especially when it comes to overperformers, a company should be listening very closely. If they're looking for new challenges, offer them some; if they want to feel more involved, ask for their opinion; if they criticize you, try to address this. In the end, though, the atmosphere in the company also has to be right – or all the appreciation in the world still won't be enough.

If all this doesn't help to keep your employee, here is one final tip: Stay in touch with former employees that you would have liked to keep. According to Jörg Knoblauch, around 50 percent of job changes don't work out. So he advises staying in touch regularly with an employee even after they leave, and asking them how they're doing. A supervisor should always actively offer the option of returning.

If the company can afford it, it should even keep the open position unfilled for two or three months. Because "the nicest thing that might happen is that a good employee returns to the company," says Knoblauch. The very best, of course, is not to lose them in the first place.